CLOSING ENTRY: Three lessons

What sustainability innovators can learn from the TerraCycle and Loop experiences

Tom Szaky//February 27, 2023//

CLOSING ENTRY: Three lessons

What sustainability innovators can learn from the TerraCycle and Loop experiences

Tom Szaky//February 27, 2023//

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Everywhere you look – social media, entrepreneurship magazines, your favorite podcasts, talks from corporate leaders – there are messages about the principles of innovation, different approaches to innovation, innovating as a startup versus an established organization, etc.

Tom Szaky is the founder and CEO of Trenton-based TerraCycle.

Considering all those voices already speaking on the topic, and that most of what they’re saying can be summed up as “be lean, then try, learn, and adapt,” the more novel insights I can offer about innovation are specific to the sustainability space.

Here are my key takeaways from building TerraCycle and Loop from the ground up:

1. Recognize how businesses really view sustainability

Corporations are constantly professing their commitment to sustainability. How often do you hear messages like, “We care about sustainability,” “Sustainability is in our DNA,” and “We’re working toward a more sustainable future,” but then you’ve looked more closely to find that not a lot of actual action is happening?

Sustainability is often viewed as a risk to be managed – a quick search will show you there are many companies where the chief sustainability officer is also the general counsel – or a cost to be managed – many CSOs report to the CFO. You’ll never hear corporations outwardly expressing this, though.

To account for this, go into meetings positioning your sustainability initiative as a way to create value, not mitigate a risk. For example, we would not go into a client meeting saying, “You produce all this waste, so create a recycling solution with us.” Instead, it is much more effective to approach the opportunity by saying, “Investing in recycling will help you gain market share.”

2. Show how your offering provides measurable value

Understand that buy-in, and the level of that buy-in, comes down to how your initiative is measured on the company’s P&L. Figure out the goals of the company you’re trying to convince – which probably boil down to something like “sell more stuff” – then your job as a sustainability innovator is to help them win on those goals by investing in your idea versus traditional ways to accomplish the same goal.

Maybe it’s demonstrating that spending the same amount on your offering as they would on an advertising spot would result in the same or better results—with added purpose. In our world at TerraCycle, we show how recycling programs can do more than just reduce material sent to landfills or incinerators. For example, in-store recycling programs can drive foot traffic, perhaps even more than traditional advertising, as we’ve seen with our retail recycling hubs. Then it’s a no-brainer for companies to drive foot traffic through recycling rather than just another advertising campaign or promo.

Don’t lead with the mission of helping the planet. That’s why you’re doing the work you do, but to the companies you’re pitching, it’s a peripheral benefit. You’ll win by leading with measurable value.

3. Beware the triangle of stagnation

Having been in the sustainability innovation space for over two decades, I’ve come to recognize a phenomenon I call the “triangle of stagnation.” Knowing about it can help you understand why there’s so little momentum in corporate sustainability.

Editorial cartoon: Public pressure for sustainability
The “triangle of stagnation” – CASSIE DUDLEY FOR TERRACYCLE

The triangle involves the following three points:

Future commitments. Companies are quick to make future pledges around sustainability. These are a seductive option because there’s no expectation of immediate action or results. Paradoxically, many times, there’s no action plan behind the commitment—it’s just a cover. As a result, many – if not most – of these commitments fail, even when they’re made as part of a collaborative pledge, as we’re seeing with the corporations who signed on to the Ellen MacArthur Foundation’s Global Commitment for 2025. But the PR benefit of the commitment always seems to outweigh the negative press for failing to reach it.

Multi-stakeholder dialogues. Bring together voices from business (including competitors), government, NGOs, and other stakeholders, to discuss problems (e.g., plastic pollution) and work toward collectively agreed-upon solutions. It sounds extremely logical and thoughtful—and it looks really good from the outside (companies capitalize on this opportunity to send out news releases). The problem is that, in many cases, what is needed to solve these issues is money flow, and money flow cannot typically be accomplished if the collaboration is pre-competitive. How can competitors, who are striving to win market share over each other, lean into such a dialogue and release much-needed funding? It seems the goal is having the dialogues in and of themselves rather than creating action and financial flows. This is further evidenced by the fact that the people representing the corporations at these discussions are rarely commercial leaders with the budgets to make action happen.

Meaningless pilots. To cover the lack of movement from future commitments and multi-stakeholder dialogues, corporations fund tiny pilots that have no commercial power and are thus not a priority. They ultimately collapse because they are owned by the sustainability teams, not the commercial teams, and don’t get the support – marketing, for example – they need to succeed. Even if they work, they can have a hard time scaling because they are not part of the commercial strategy. Corporations tend to conclude these pilots by saying they’ve learned a lot but need to learn more. They launch more pilots, and the cycle continues.

What tends to happen is that companies bounce between these three points over and over, not making any meaningful progress. It’s like the Bermuda Triangle—sustainability initiatives disappear under mysterious circumstances, never to be seen again.

I don’t say any of this to curb your enthusiasm but instead to help you become wise to the ways sustainability innovators can get tripped up. Now that you’re aware, you can apply these principles as you continue to scale your venture and help the planet along the way. Remember: Engage commercial team members early on and do so broadly. Have them identify key performance indicators and chart a course for them to be involved. Show how your innovation provides value in P&L terms (or another way the organization will understand). And be aware of the tendency for companies to stagnate—so you can recognize when a company is on this path and encourage more meaningful action.

Tom Szaky is CEO of Trenton-based TerraCycle.